Morgan Stanley Revises Sensex Target Amid Global Market Strain

Morgan Stanley has adjusted its target for India's BSE Sensex to 82,000 by December 2025, despite recent global market pressures. This updated target highlights a potential 9% upside, driven by India's macroeconomic strengths and stock selection strategies, with sector focus on financials and consumer cyclicals.

In a significant move, global brokerage firm Morgan Stanley has lowered its target for India's benchmark stock index, the BSE Sensex, from 93,000 to 82,000 for December 2025. This adjustment comes in the wake of increasing selling pressure in global markets, spurred by the United States' new tariff policies under President Donald Trump.

Despite the downward revision, Morgan Stanley's new target suggests a potential upside of nearly 9% from current levels. The firm remains optimistic about the Indian market's ability to outperform global counterparts, citing lower market volatility and robust macroeconomic fundamentals as key factors. The brokerage stated, "Our BSE Sensex target of 82,000 implies upside potential of 9 per cent to December 2025."

The report highlights a shift in the Indian equity market from being macro-driven to focusing more on individual stock selection. Consequently, Morgan Stanley has trimmed its active positions in its sector model portfolio, reducing from 180 to 80 basis points on average. Moving forward, the firm favors financials, consumer cyclicals, and industrials while being cautious about energy, materials, utilities, and healthcare sectors.

Several India-specific catalysts could boost market performance, Morgan Stanley noted. These include the Reserve Bank of India's dovish policy stance, potential Goods and Services Tax (GST) rate cuts stimulating consumption, a possible trade deal with the US, and improving domestic growth indicators. The base case target of 82,000 for the Sensex is based on expectations of persistent macroeconomic stability, fiscal consolidation, increased private investment, and positive real GDP growth compared to real interest rates, with a 50% probability of occurrence.

The more optimistic bull case envisions the Sensex reaching 91,000 by December 2025, although this scenario is only assigned a 30% probability. Such an outcome would require international oil prices to remain under USD 70 per barrel, leading to lower inflation and possibly allowing the RBI to further cut rates. At the revised 82,000 target, the Sensex would trade at a trailing price-to-earnings ratio of 23 times, above the long-term average of 21 times over the past 25 years.

Morgan Stanley believes this valuation premium indicates investor confidence in India's medium-term economic growth prospects, driven by predictable policies and a solid economic foundation.

(With inputs from agencies.)